In conclusion, the House Republican plan should be considered a significant reform of the income tax, one that broadens the tax base, lowers marginal tax rates
on wages modestly, and reduces marginal tax rates
on investment significantly.
The plan would significantly increase marginal tax rates
and the cost of capital, which would lead to 9.
Marginal tax rates
are commonly associated with federal income tax brackets.
2001), Gentry and Hubbard (2000, 2005), Gurley-Calvez and Bruce (2013), and Fossen and Steiner (2009) all obtain evidence of negative effects of marginal tax rates
on entrepreneurship or self-employment.
Padovano and Galli (2002), without making any explicit use of public expenses, also provide empirical results from 23 OECD countries that are in favor of a negative impact of high marginal tax rates
on income, while Arm and Koray (2006) within an environment which makes use of general government expenses, find that income taxation initially increases output but, eventually, it leads to lower levels in income in the long-run.
Indeed, the vast literature examining tax rates and economic growth strongly suggests that marginal tax rates
and GDP growth rates are negatively related.
by simply multiplying the amount of the exclusion or deduction by the individual's marginal tax rate
There is, however, a stronger connection between marginal tax rates
Romer and Romer therefore argue that to the extent the changes mattered, it was likely through the incentive effects of changes in marginal tax rates
Given that marginal tax rates
are estimated at levels often significantly below the statutory rate, firms should consider their own tax situation in gauging the real cost of a switch from LIFO.
This technique, known as Marginal Tax Rate
Analysis, is explained in more detail in the accompanying article titled "Managing Marginal Tax Rates
: A Basic Tax Reduction Tool.
The resulting tax system is much less progressive than in the first scenario, as the marginal tax rates
for the lowest and highest income groups are 30.